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Boise Cascade Holdings Reports First Quarter 2009 Financial Results

BOISE, Idaho, May 7 /CNW/ -- Boise Cascade Holdings, L.L.C. (BC Holdings
or Company) announced a net loss of $88.2 million for the quarter ended March
31, 2009. Approximately $40.0 million of the quarterly loss was related to
noncash charges associated with the Company's equity investment in Boise Inc.
In first quarter 2009, BC Holdings' building products subsidiary, Boise
Cascade, L.L.C., reported negative earnings before interest, taxes,
depreciation, and amortization ("EBITDA") of $31.3 million, which included the
negative impact of $5.0 million of expenses related to the indefinite
curtailment of its La Grande, Oregon, lumber operation. The Company finished
first quarter with $189.5 million of cash after making pension plan
contributions totaling $25.0 million, tax distributions of $9.9 million, open
market note repurchases of $5.6 million, and payments under deferred
compensation agreements for employees terminated in connection with the sale
of our paper businesses of $2.5 million. The individual segment results are
discussed in more detail below.
"We took a number of difficult actions this quarter in response to the
very weak end-product demand and the uncertainty as to the timing and strength
of a recovery in new residential construction. The steps taken this quarter
included completing the closure of our White City, Oregon, plywood operation;
announcing the indefinite curtailment of our La Grande, Oregon, lumber
operation; curtailing indefinitely our plywood production in Oakdale,
Louisiana; freezing salaries; suspending the 401(k) match for our salaried
employees; freezing our salaried pension plan effective at the end of this
year; and reducing capital spending for 2009 to a range of $20 to $25 million.
These actions are all aimed at reducing our cash usage and preserving our
good liquidity position," remarked Duane McDougall, chairman and chief
executive officer.
First Quarter Segment Results
U.S. housing starts declined 50% in the first quarter, dropping from an
annualized rate of 1.05 million in the first quarter 2008 to 0.52 million in
the first quarter 2009. In the first quarter, turmoil in financial markets,
continuing foreclosures, elevated inventories of unsold homes, falling median
home prices, rising unemployment, and low consumer confidence all contributed
to a weak demand environment for the building products we manufacture and
distribute.
Sales in our Building Materials Distribution ("BMD") business during the
first quarter were $335.0 million, compared with $503.9 million in first
quarter 2008 and $411.5 million in fourth quarter 2008. Compared with first
quarter 2008, the 34% decline in sales resulted primarily from a 33% decline
in product volumes sold. EBITDA generated by BMD declined from positive $0.7
million in first quarter 2008 to negative $6.6 million in first quarter 2009.
BMD's lower sales activity resulted in fewer gross margin dollars being
generated to cover cash operating costs, such as occupancy, payroll, and
delivery; however, almost half of the gross profit decline compared to first
quarter 2008 was offset by cost and efficiency improvements made over the last
year.
Sales in our Wood Products segment during the first quarter were $116.5
million, compared with $198.7 million in first quarter 2008 and $156.0 million
in fourth quarter 2008. Compared with first quarter 2008, sales of engineered
wood products, plywood, and lumber declined due to lower volumes and prices.
Particleboard sales declined as reduced volumes were only modestly offset by
higher prices. First quarter EBITDA for Wood Products was negative $28.6
million, down $19.0 million from the $9.6 million of negative EBITDA reported
in first quarter 2008. The decrease in EBITDA was driven principally by
pricing declines. The first quarter 2009 negative EBITDA included $5.0
million of expenses associated with our plan to indefinitely curtail our La
Grande, Oregon, lumber mill this summer. We have been taking rolling
curtailments at all of our other Wood Products operations to maintain
appropriate inventory levels, while trying to minimize the negative impact
these curtailments have on our employees and our operating results.
Outlook
We expect end product demand to remain weak when compared to normal
historical demand levels. We believe single-family housing starts are
unlikely to show any significant rebound during 2009 absent a change in the
mortgage markets, improved consumer confidence, and a reduction in
foreclosures and housing vacancy rates. Industry product sales volumes are
likely to remain depressed and commodity wood product prices will largely
depend on operating rates. We expect to manage our production levels to our
sales demand, which will likely cause us to operate our facilities well below
their capacity.
About Boise Cascade
BC Holdings is a privately held company headquartered in Boise, Idaho.
Our wholly owned subsidiary, Boise Cascade, L.L.C., is a leading U.S.
wholesale distributor of building products and one of the largest producers of
engineered wood products and plywood in North America. At March 31, 2009, we
also owned approximately 47.6% of Boise Inc., a publicly traded North American
paper and packaging producer listed on the New York Stock Exchange. For more
information, please visit our website at www.bc.com.
Webcast and Conference Call
BC Holdings will host a webcast and conference call on Thursday, May 7,
at 11:00 a.m. Eastern, at which time we will review the company's recent
performance. You can join the webcast through the Boise Cascade website. Go
to www.bc.com and click on the link to the webcast under the News &amp; Events
heading. Please go to the website at least 15 minutes before the start of the
webcast to register. To join the conference call, dial 800-374-0165
(international callers should dial 706-902-1407) at least 10 minutes before
the start of the call.
The archived webcast will be available in the News &amp; Events section of
Boise Cascade's website. A replay of the conference call will be available
from Thursday, May 7, at 2:00 p.m. Eastern through Friday, May 15, at 11:59
p.m. Eastern. Playback numbers are 800-642-1687 for U.S. calls and
706-645-9291 for international calls, and the passcode will be 95298165.
Basis of Presentation
We present our consolidated financial statements in accordance with U.S.
generally accepted accounting principles (GAAP). Our earnings release also
supplements the GAAP presentations by reflecting EBITDA. EBITDA represents
income (loss) before interest (interest expense, interest income, and change
in fair value of interest rate swaps), income taxes, and depreciation,
amortization, and depletion. EBITDA is the primary measure used by our chief
operating decision makers to evaluate segment operating performance and to
decide how to allocate resources to segments. We believe EBITDA is useful to
investors because it provides a means to evaluate the operating performance of
our segments and our company on an ongoing basis using criteria that are used
by our internal decision makers and because it is frequently used by investors
and other interested parties in the evaluation of companies. We believe
EBITDA is a meaningful measure because it presents a transparent view of our
recurring operating performance and allows management to readily view
operating trends, perform analytical comparisons, and identify strategies to
improve operating performance. For example, we believe that the inclusion of
items such as taxes, interest expense, and interest income distorts
management's ability to assess and view the core operating trends in our
segments. EBITDA, however, is not a measure of our liquidity or financial
performance under GAAP and should not be considered as an alternative to net
income (loss), income (loss) from operations, or any other performance measure
derived in accordance with GAAP or as an alternative to cash flow from
operating activities as a measure of our liquidity. The use of EBITDA instead
of net income (loss) or segment income (loss) has limitations as an analytical
tool, including the inability to determine profitability; the exclusion of
interest expense, interest income, change in the fair value of interest rate
swaps, and associated significant cash requirements; and the exclusion of
depreciation, amortization, and depletion. Management compensates for these
limitations by relying on our GAAP results. Our measures of EBITDA are not
necessarily comparable to other similarly titled captions of other companies
due to potential inconsistencies in the methods of calculation.
Forward-Looking Statements
This news release contains statements that are "forward looking" within
the Private Securities Litigation Reform Act of 1995. These statements speak
only as of the date of this press release. While they are based on the
current expectations and beliefs of management, they are subject to a number
of uncertainties and assumptions that could cause actual results to differ
from the expectations expressed in this release.
Boise Cascade Holdings, L.L.C.
Consolidated Statements of Loss
(unaudited, in thousands)
Three Months Ended
March 31 December 31,
2009 2008 (b) 2008
Sales
Trade $407,724 $880,800 $501,169
Related parties 5,703 95,782 15,433
413,427 976,582 516,602
Costs and expenses
Materials, labor, and other
operating expenses 381,071 880,658 462,162
Materials, labor, and other
operating expenses
from related parties 12,290 6,180 21,792
Depreciation, amortization, and
depletion (c) 11,119 10,035 8,788
Selling and distribution expenses 45,241 63,365 48,043
General and administrative
expenses 6,925 14,653 6,786
General and administrative
expenses from related party 2,433 977 2,133
Gain (loss) on sale of Paper and
Packaging &amp; Newsprint assets (a) - (8,063) 81
Other (income) expense, net (c) 2,681 (942) 6,709
461,760 966,863 556,494
Income (loss) from operations (48,333) 9,719 (39,892)
Equity in net income (loss) of
affiliate 3,005 (8,552) 3,921
Impairment of investment in equity
affiliate (e) (43,039) - -
Foreign exchange loss (332) (613) (1,702)
Change in fair value of contingent
value rights (f) 194 (4,773) 1,296
Change in fair value of interest
rate swaps (g) - (6,284) -
Gain on repurchase of long-term
debt (d) 6,026 - -
Interest expense (5,616) (15,381) (6,242)
Interest income 397 2,601 1,062
(39,365) (33,002) (1,665)
Loss before income taxes (87,698) (23,283) (41,557)
Income tax (provision) benefit (483) (1,155) 1,053
Net loss $(88,181) $(24,438) $(40,504)
Segment Information
(unaudited, in thousands)
Three Months Ended
March 31 December 31,
2009 2008 (b) 2008
Segment sales
Building Materials
Distribution $335,022 $503,884 $411,472
Wood Products 116,479 198,733 156,037
Paper (b) - 253,508 -
Packaging &amp; Newsprint (b) - 113,485 -
Intersegment
eliminations and other (38,074) (93,028) (50,907)
$413,427 $976,582 $516,602
Segment income (loss)
Building Materials
Distribution $(8,544) $(1,209) $(4,833)
Wood Products (c) (37,631) (17,100) (31,488)
Paper (b) - 20,718 -
Packaging &amp; Newsprint (b) - 5,685 -
Corporate and Other (a) (2,490) 1,012 (5,273)
(48,665) 9,106 (41,594)
Equity in net income
(loss) of affiliate 3,005 (8,552) 3,921
Impairment of investment
in equity affiliate (e) (43,039) - -
Change in fair value of
contingent value
rights (f) 194 (4,773) 1,296
Change in fair value of
interest rate swaps (g) - (6,284) -
Gain on repurchase of
long-term debt (d) 6,026 - -
Interest expense (5,616) (15,381) (6,242)
Interest income 397 2,601 1,062
Loss before income
taxes $(87,698) $(23,283) $(41,557)
EBITDA (h)
Building Materials
Distribution $(6,611) $714 $(2,913)
Wood Products (28,559) (9,566) (24,708)
Paper - 21,066 -
Packaging &amp; Newsprint - 5,738 -
Corporate and Other (2,376) 1,189 (5,185)
Equity in net income
(loss) of affiliate 3,005 (8,552) 3,921
Impairment of investment
in equity affiliate (e) (43,039) - -
Change in fair value of
contingent value
rights (f) 194 (4,773) 1,296
Gain on repurchase of
long-term debt (d) 6,026 - -
$(71,360) $5,816 $(27,589)
Boise Cascade Holdings, L.L.C.
Consolidated Balance Sheets
(unaudited, in thousands)
March 31, December 31,
2009 2008
ASSETS
Current
Cash and cash equivalents $189,544 $275,803
Receivables
Trade, less allowances of $2,124 and
$1,843 106,750 78,393
Related parties 1,497 3,112
Other 4,370 5,907
Inventories 265,249 279,023
Prepaid expenses and other 3,613 1,296
571,023 643,534
Property
Property and equipment, net 282,985 291,999
Timber deposits 8,510 8,632
291,495 300,631
Investment in equity affiliate 22,622 20,985
Deferred financing costs 7,318 7,862
Goodwill 12,170 12,170
Intangible assets, net 9,143 9,248
Other assets 6,259 6,009
Total assets $920,030 $1,000,439
Boise Cascade Holdings, L.L.C.
Consolidated Balance Sheets (continued)
(unaudited, in thousands, except for equity units)
March 31, December 31,
2009 2008
LIABILITIES AND CAPITAL
Current
Accounts payable
Trade $83,100 $69,478
Related parties 2,931 2,195
Accrued liabilities
Compensation and benefits 32,487 38,228
Interest payable 7,756 3,930
Other 15,028 30,893
141,302 144,724
Debt
Long-term debt 303,146 315,000
Other
Compensation and benefits 120,754 172,275
Other long-term liabilities 11,304 12,125
132,058 184,400
Redeemable equity units
Series B equity units - 2,914,840 and 2,920,574
units outstanding 2,915 2,920
Series C equity units - 19,945,724 and
11,016,668 units outstanding 3,514 3,037
6,429 5,957
Commitments and contingent liabilities
Capital
Series A equity units - no par value; 66,000,000
Units authorized and outstanding 83,588 81,967
Series B equity units - no par value;
550,000,000 units authorized
and 532,414,853 units outstanding 253,507 268,391
Series C equity units - no par value; 44,000,000
units authorized
and 11,183,000 units outstanding - -
Total capital 337,095 350,358
Total liabilities and capital $920,030 $1,000,439
Boise Cascade Holdings, L.L.C.
Consolidated Statements of Cash Flows
(unaudited, in thousands)
Three Months Ended
March 31
2009 2008
Cash provided by (used for) operations
Net loss $(88,181) $(24,438)
Items in net loss not using (providing)
cash
Equity in net (income) loss of
affiliate (3,005) 8,552
Impairment of investment in equity
affiliate 43,039 -
Depreciation, depletion, and
amortization of deferred financing
costs and other 11,462 10,378
Related-party interest income - (986)
Pension and other postretirement
benefit expense 4,939 5,007
Change in fair value of contingent
value rights (194) 4,773
Change in fair value of interest rate
swaps - 6,284
Management equity units expense, 778 347
net of expense related to the Sale
Gain on repurchase of long-term debt (6,026) -
Gain on sale of assets, net (82) (10,972)
Facility closure and curtailment costs 2,754 -
Other 332 633
Decrease (increase) in working capital,
net of dispositions
Receivables (25,800) (75,192)
Inventories 13,174 12,765
Prepaid expenses and other (1,357) (1,646)
Accounts payable and accrued
liabilities 7,826 21,143
Pension and other postretirement
benefit payments (25,045) (20,716)
Current and deferred income taxes 476 1,403
Other (1,826) (155)
Cash used for operations (66,736) (62,820)
Cash provided by (used for) investment
Proceeds from sale of assets, net of
cash contributed 137 1,227,327
Expenditures for property and equipment (4,229) (18,219)
Increase in restricted cash - (183,290)
Other 101 (1,019)
Cash provided by (used for) investment (3,991) 1,024,799
Cash provided by (used for) financing
Issuances of long-term debt - 229,224
Payments of long-term debt (5,627) (925,563)
Short-term borrowings - (10,500)
Tax distributions to members (9,897) (127,342)
Repurchase of management equity units (8) (18,289)
Cash paid for termination of interest
rate swaps - (11,918)
Other - (4,114)
Cash used for financing (15,532) (868,502)
Increase (decrease) in cash and cash
equivalents (86,259) 93,477
Balance at beginning of the period 275,803 57,623
Balance at end of the period $189,544 $151,100
Summary Notes to Consolidated Financial Statements and Segment Information
The Consolidated Statements of Loss, Consolidated Balance Sheets,
Consolidated Statements of Cash Flows, and Segment Information do not include
all Notes to Consolidated Financial Statements and should be read in
conjunction with the company's 2008 Annual Report on Form 10-K and the
company's Quarterly Report on Form 10Q for the period ended March 31, 2009.
Net loss for all periods presented involved estimates and accruals.
(a) In connection with the sale of our Paper and Packaging &amp; Newsprint
assets, and most of our Corporate and Other assets (the Sale), to
Boise Inc. (formerly Aldabra 2 Acquisition Corp.), we recorded
$8.1 million of income and $(0.1) million of expense in "Gain (loss)
on sale of Paper and Packaging &amp; Newsprint assets" in the Corporate
and Other segment in our Consolidated Statements of Loss during the
three months ended March 31, 2008 and December 31, 2008. For more
information related to the Sale, see the Notes to Consolidated
Financial Statements in our Form 10-K for the year ended December 31,
2008.
(b) The equity interest that we own in Boise Inc. represents a
significant continuing involvement as defined in Statement of
Financial Accounting Standards No. 144, Accounting for the Impairment
or Disposal of Long-lived Assets. As a result, the Paper and
Packaging &amp; Newsprint segment results are included in continuing
operations through February 21, 2008.
(c) In first quarter 2009, we committed to indefinitely curtailing the
lumber manufacturing facility in LaGrande, Oregon, and we recorded
$4.4 million of expense in "Other (income) expense, net" in the Wood
Products segment in our Consolidated Statement of Loss. In addition,
we recorded $2.5 million of accelerated depreciation in
"Depreciation, amortization, and depletion" and $0.6 million of
expenses in "Materials, labor, and other operating expenses" in the
Wood Products segment in our Consolidated Statement of Loss.
In 2008, we permanently closed our veneer operation in St. Helens,
Oregon, and in December 2008, we committed to the March 2009 closure
of the plywood manufacturing facility in White City, Oregon. For
these items, we recorded $7.3 million of expense in "Other (income)
expense, net" in the Wood Products segment in our Consolidated
Statement of Loss for the three months ended December 31, 2008.
(d) For the three months ended March 31, 2009, we recorded a $6.0 million
net gain on the repurchase of $11.9 million of senior subordinated
notes.
(e) On March 31, 2009, we concluded that our investment in Boise Inc. met
the definition of other than temporarily impaired as defined in APB
Opinion No. 18, The Equity Method of Accounting for Investments in
Common Stock. Accordingly, we recorded a $43.0 million charge in
"Impairment of investment in equity affiliate" in our Consolidated
Statement of Loss for the three months ended March 31, 2009. This
charge reflects the decrease in the fair value of the investment
below its carrying value. The fair value of our investment in Boise
Inc. was calculated based on the number of Boise Inc. shares we own,
37.1 million shares, and Boise Inc.'s stock price on March 31, 2009,
of $0.61. For more information, see the Notes to Unaudited Quarterly
Consolidated Financial Statements in our Form 10-Q for the period
ended March 31, 2009.
(f) During the three months ended March 31, 2009 and 2008, and December
31, 2008, we recorded $0.2 million, $(4.8) million, and $1.3 million
of income (expense) related to the fair value of the contingent value
rights (CVRs) that we and Terrapin Partners Venture Partnership
granted to certain Boise Inc. investors. During the three months
ended March 31, 2009, we settled our obligation related to the CVRs
using 0.8 million Boise Inc. shares. For more information related to
the CVRs, see the Notes to Unaudited Quarterly Consolidated Financial
Statements in our Form 10Q for the period ended March 31, 2009.
(g) The three months ended March 31, 2008, included $6.3 million of
expense related to changes in the fair value of our interest rate
swaps, which were terminated in February 2008.
(h) EBITDA represents income (loss) before interest (interest expense,
interest income, and change in fair value of interest rate swaps),
income taxes, and depreciation, amortization, and depletion. The
following table reconciles BC Holdings, L.L.C., net loss to BC
Holdings, L.L.C., EBITDA and Boise Cascade, L.L.C., EBITDA for the
three months ended March 31, 2009 and 2008, and December 31, 2008:
Three Months Ended
March 31 December 31,
2009 2008 2008
(unaudited, in thousands)
BC Holdings, L.L.C., net loss $(88,181) $(24,438) $(40,504)
Change in fair value of interest
rate swaps (f) - 6,284 -
Interest expense 5,616 15,381 6,242
Interest income (397) (2,601) (1,062)
Income tax provision 483 1,155 (1,053)
Depreciation, amortization, and
depletion (c) 11,119 10,035 8,788
BC Holdings, L.L.C., EBITDA (71,360) 5,816 (27,589)
Equity in net (income) loss of
affiliate (a) (3,005) 8,552 (3,921)
Impairment of investment in
equity affiliate (e) 43,039 - -
Boise Cascade, L.L.C., EBITDA $(31,326) $14,368 $(31,510)